Are e-checks a safe way to pay for travel?

As she paged through Viking River Cruises’ glossy brochure one afternoon, Diane Moskal noticed a new way to save money: If she booked the Waterways of the Tsars itinerary sailing from Moscow to St. Petersburg with something called an e-check, the cruise line promised to knock $100 off the fare.

An e-check is an electronic debit to your checking account, and it’s billed as a quick, convenient way to pay for your vacation that is “as easy as providing your credit card number,” according to Viking.

But like any smart traveler, Moskal wasn’t content with that explanation. “I see that the cruise lines advocate consumer savings if you pay by e-check,” she says. But she also found several complaints online, which made her hesitate. She wondered: Are e-checks safe?

As airlines, hotels and cruise lines offer new ways to pay for their products, Moskal’s question resonates across the entire travel industry. On several airlines, including American, Southwest and United, you can book a ticket through PayPal. Virgin Galactic made a splash late last year when it announced that it would accept Bitcoin for its spaceflights. One hostel in San Francisco, the Pacific Tradewinds, offers a 10 percent discount to guests who pay with the digital currency.

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While Viking River’s e-check option isn’t new — it’s been available since 2008 — the concerns raised by Moskal and others are. It turns out that there are several important differences between paying by e-check and paying by credit card. And given the popularity of new electronic payment choices, it’s a good time to understand how they work.

Americans made 22.1 billion electronic payments using options such as e-checks in 2012, the most recent year for which numbers are available, according to a recent Federal Reserve study. The number of transactions grew at an annual rate of 5.1 percent from 2009 to 2012, the Fed reports. By comparison, consumers conducted 26.2 billion credit card transactions in 2012, and those numbers grew at a somewhat faster 7.6 percent annual rate.

The benefits to companies are obvious: They avoid paying any fees associated with credit cards and they receive the customer’s money right away, deposited directly into their merchant bank. But consumers have an advantage, too, at least according to companies like Viking.

“Guests who pay via e-check receive a discount of two percent, which reflects a savings that Viking passes on to the guest by not having to pay a fee to a credit card company,” says Viking spokesman Ian Jeffries. He says that the company also recommends payment via e-check as an alternative to a credit card so that you can avoid any interest rates or fees that some credit card companies may charge.

Viking is hardly alone. One recent study found that a quarter of airlines worldwide offer some form of alternative electronic payment option. As companies try to escape the high merchant fees charged by credit cards, these payment choices are bound to become more common.

“Conventionally, the discounted pay-by-e-check transactions are processed through the traveler’s bank, given the customer’s bank routing numbers and checking or savings account numbers,” says Oliver McGee, a former U.S. deputy assistant secretary of transportation for technology policy and a professor at Howard University.

E-checks come in two basic flavors: Check21 electronic payment processing, which is more flexible but also more expensive, and the more restricted ACH wire deposit payments, which are commonly used for handling direct deposits for employees and for paying bills.

As a practical matter, setting up an e-check involves giving the travel company basic bank information, typically gained through the bank’s routing numbers, as well as your account number, and authorizing the transaction.

But you also sacrifice something when you’re paying with an e-check. As with paper checks, once the money is deposited into the company’s account, your ability to reverse the charges is limited. Your right to dispute an e-check travel purchase is governed by either the ACH or Check21 terms and conditions as well as the electronic fraud protection conditions of your financial institution.

By comparison, a credit card purchase is protected by federal law under the Fair Credit Billing Act, which, among other things, lets you dispute charges for products you didn’t accept or that weren’t delivered as agreed, and which can quickly fix a billing error.

“You have more leeway to dispute a purchase made with a credit card,” says David Bakke, who edits the personal finance website Money Crashers (www.moneycrashers.com).

If an e-check booking goes wrong — say, for example, that your cruise line files for bankruptcy protection and you want a refund — you may lose your money. Bakke says that e-checks can be reversed in only three cases: if you didn’t authorize the purchase, if the e-check was processed on a date earlier than authorized or if the amount of the processed transaction is different from what was authorized. Otherwise, the money is as good as gone.

While complaints about e-checks are rare, grievances with companies over wired money appear to be increasingly common. Not a week seems to go by that someone doesn’t ask me to help retrieve money that had been wired to a company or an individual. These transactions are difficult, if not impossible, to undo. Generally, if you’re dealing with a small local company or an individual, you can kiss the cash goodbye.

After I explained the differences in payment methods to Moskal, she consulted her travel agent, who booked her on the Viking riverboat cruise to Russia this fall. “She never raised the question of paying by anything other than credit card,” says Moskal.

Elliott, National Geographic Traveler’s reader advocate, author of “How to Be the World’s Smartest Traveler” and writer of the weekly Travel Troubleshooter column, maintains a consumer advocate website at elliott.org.